GOP targets child tax break for illegal immigrants

FILE - In this July 8, 2011 file photo, House Social Security subcommittee Chairman Rep. Sam Johnson, R-Texas presided over the subcommittee's hearing on Capitol Hill in Washington. Republicans are looking to deny illegal immigrants the child tax credit, and refund checks as one way to help pay for extending the Social Security tax cut another 10 months.

WASHINGTON — Republicans are looking to deny child tax credits to illegal immigrants — refund checks averaging $1,800 — in an effort that has roused anger among Hispanics and some Democratic lawmakers.

The proposal, which would require people who claim the federal credit to have Social Security numbers to prove they're legal workers, is being offered as a way to help pay for extending the Social Security tax cut for most American wage-earners. It would trim federal spending by about $10 billion over a decade.

Senate Majority Leader Harry Reid of Nevada says the proposal unfairly goes after the children of poor Hispanic workers. Such kids often are U.S. citizens, even when their parents aren't, because they were born in this country.

Says Leticia Miranda, senior policy adviser of the National Council of La Raza: "People who are making close to the minimum wage and are raising children in this country — and we're asking them to pay for the payroll tax cut?" She says, "It's outrageous and it's crazy."

On the other side, Republicans and some Democrats say what's crazy is even having a debate over whether the government should be cutting checks to people who have sneaked into the country illegally. It's hard to imagine there isn't a healthy majority, even in the Democratic-controlled Senate, to stop the practice — if it's actually brought to a vote.

"We have rules about tax credits and benefits, and it seems to me they need to be applied fairly and across the board," said Democrat Sen. Claire McCaskill, who is facing a difficult re-election bid in Missouri. "If there are rules, they need to be enforced. I think it's just that simple. I don't think it's complicated."

Illegal immigrants have been barred from other refundable tax credits, such as the earned income tax credit for lower-income workers. But a 1997 law enacting the child tax credit doesn't specifically exclude them from collecting that separate benefit. It was significantly expanded in 2001 and 2009 so that many more people are eligible for refundable credits, though the expanded credit is slated to expire at the end of the year along with other Bush-era tax cuts.

"Although the law prohibits aliens residing without authorization in the United States from receiving most federal public benefits, an increasing number of these individuals are filing tax returns claiming this refundable credit," Rep. Sam Johnson, R-Texas, said when the House debated the payroll tax cut measure in December. "Illegal immigrants bilked $4.2 billion from the U.S. taxpayers (in 2010). I think that it's time that we fixed it."

The situation has Democrats in a box. If they fight the GOP effort to cut back payments of the tax credit, they'll be favoring the delivery of refunds to people who not only don't owe income taxes but aren't supposed to be in the country in the first place.

What's more, closing the loophole would raise real money — an estimated $10 billion over 10 years under the approach favored by House Republicans.

The Treasury Department says that in the 2010 filing year more than $4 billion in child credit refunds went to 2.3 million people who filed tax returns but didn't have Social Security numbers proving they were citizens or legal workers. That's a four-fold increase over five years earlier.

On the other side are politically influential Hispanic groups, a key Democratic-friendly constituency. Opponents of tightening eligibility for the child tax credit point out that six of every seven affected families are Hispanic, with an average household income of about $21,000. Tax credits averaging $1,800 per family make a huge difference at such income levels.

Hispanics point out that in many instances the tax credit goes to wokers who aren't citizens but whose children are — because they've been born in the country and therefore can have Social Security numbers of their own. They say such children should reap the benefit of the tax credit just like other children in comparable economic circumstances.

"I just think the child tax credit is working just fine and there's no need to punish children," Sen. Reid said last week. "We're supposed to try to be helping them."

One option under consideration is to require tax filers to supply a Social Security number for the child when claiming the tax credit instead of requiring that at least one of the parents possess one. That would respond to criticism that the GOP proposal is unfair to the citizen children of illegal immigrants.

"We're not in favor of fraudulent payments or payments that shouldn't be made, but we don't want to create obstacles to supporting low-income families who are trying to care for their children," said Sen. Dick Durbin, D-Ill. "Even though the parent doesn't have a Social Security number, they could still be entitled under their tax return, for a child tax credit."

Congress needs to find about $160 billion between now and the end of the month to cover the costs of extending through Dec. 31 a Social Security tax cut averaging about $20 a week for 160 million workers, federal unemployment benefits for the long-term jobless and unreduced Medicare fees for doctors. All are now due to expire Feb. 29.